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After two years of declining operating margins, Household Products Companies rebound in margin in 2016. With the reporting of full year results, the industry trend is clear. The margin improvement is due to a rise in price, and focused cost-cutting programs on labor productivity and sourcing. Note the patterns in the Clorox, Kimberly-Clark, and P&G results. P&G is making the greatest improvement in inventory turns while Colgate enjoys the highest margins. With Colgate operating with a tighter asset strategy, the Colgate has almost a 4X Return on Invested Capital (ROIC) when compared to P&G.

In Figure 1, we contrast the patterns of Kimberly-Clark and Clogate while in Figure 2, we contrast the orbit chart patterns of P&G and Kimberly-Clark. The averages for the period of 2006-2016 are listed in the center boxes.

Figure 1. Kimberly-Clark and Colgate Orbit Chart for the Period of 2000-2016 at the Intersection of Operating Margin and Inventory Turns

Figure 1. Kimberly-Clark and P&G Orbit Chart for the Period of 2000-2016 at the Intersection of Operating Margin and Inventory Turns

Who does supply chain best? It depends on what you measure. We share this data to help companies set realistic targets and rates of improvement.

Church & Dwight shows the most improvement on the Supply Chain Metrics That Matter (as shown in Figure 3), but the most balanced performance is Clorox. In Table 1, we share the average results for Household Products Companies on the Supply Chain Metrics That Matter.

Table 1: Household Product Company Average Peformance on the Supply Chain Metrics That Matter for the Period of 2009-2015

Figure 3. Church & Dwight Orbit Chart at the Intersection of Inventory Turns and Operating Margin

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Author

Lora Cecere

Lora is the Founder of Supply Chain Insights. She founded the firm in 2012 to re-invent the analyst model to make it friendlier and more usable. She writes for the blog Supply Chain Shaman, for Forbes and for Linkedin. Her writing is also featured in a Consumer Goods Technology column Uncorked and in a monthly article series on Metrics that Matter in Supply Chain Quarterly. She has also authored four books: Bricks Matter, Supply Chain Metrics That Matter, and the Shaman's Journal for 2014 and 2105.
Her prior experience includes fifteen years leading manufacturing and distribution teams at Procter & Gamble, Clorox, Dreyer's Grand Ice Cream (now a division of Nestle) and General Foods (now a division of Kraft/Heinz) followed by ten years of building and marketing software at Manugistics and Descartes Systems Group. After her experiences in leading teams and building software, Lora became an industry analyst. This was first at the Gartner Group in 2001-2003, followed by work at AMR Research in 2004-2010. When Gartner bought AMR Research, she became a partner at the Altimeter Group where she invested time in learning the ins and outs of open content research.
In her work as an analyst, Lora works with about 200 clients a year, and speaks at about fifty conferences annually. A frequent traveler, you will often find Lora writing on a cross-continent flight.
When not writing or managing Supply Chain Insights, Lora is busy quilting, knitting, and practicing ballet. An avid lover of art, you will often find Lora lurking in art museums in her travels.